Seattle: Build more, build bigger, be patient, and forget rent control

It’s an election year in Seattle and rents are soaring. Some of my neighbors and politicians are calling for rent control laws. As someone who wouldn’t really benefit or be harmed directly by such laws, I really hope these don’t come to pass.

Some background to start: Seattle’s City Council is going through a major shift this year. Instead of 9 council members elected by the whole city, only two will be elected “at-large” and the remaining seven will serve one district of the city. My district, District 3, includes a wide swath of the city’s demographics: it includes the Broadmoor gated community, the historically black Central District, and my neighborhood of Capitol Hill. Capitol Hill is so large that it’s often described as many subneighborhoods from the glittering “Fancy Pants” mansions to the mixed-income apartments of I-5 Shores. Our neighborhood’s council member candidate who already serves on City Council, Kshama Sawant, is a Ph.D in economics, an outspoken socialist, and a fierce proponent of rent control.

There’s no doubt that rents are skyrocketing in neighborhoods like Capitol Hill that are close to downtown and to South Lake Union, where Amazon could employ some 71,500 employees by the decade’s end. City-wide, the median rent increased $113 or 11% from 2010 to 2013. Some neighborhoods are rising even faster, like Ballard, whose price increase from Q1 to Q2 2014 was more than triple the city average.

The state of Washington bans all rent control so any city official who wants rent control will have to effect change at a higher level first. With just 60 days’ notice, a landlord can raise rent by any amount. Stories abound of 60%, 80%, and even 150% rent rises, especially after a building sells to a new investor. My old building, the Copperfield Apartments on First Hill, was charging me about $1000 a month for a 1-bedroom unit in a 25-year-old building that was already falling apart from poor maintenance: for example, the owners failed to replace old water heaters and weren’t even insured to cover the case when my apartment flooded after a water tank burst above my bedroom. The Copperfield was later sold to an investment group who remodeled it, renamed it the Vesper, and now leases a 1-bedroom apartment for $1629 per month.

It’s easy to see why rents are suddenly going up. Tech workers make up a significant portion of the transplants into Seattle. Landlords can read Glassdoor and run a simple “1/3 of gross income” formula on salaries. The median salary that Bachelor’s graduates from Carnegie Mellon’s School of Computer Science received in 2014 was $100,000 per year, so that’s a maximum rent of about $2,800 a month. That’ll pay for a nice two-bedroom apartment close to downtown Seattle, but in San Francisco or in Manhattan, $2,800 doesn’t get you much. (Amazon trumpeted Seattle’s housing prices in a well-intentioned and controversial video aimed at prospective employees two years ago.)

Rents are soaring and increases are effectively 60-day eviction notices to those with average incomes. Enter the rent control debate. In a questionnaire circulated by the Capitol Hill Seattle blog to District 3 candidates, Dr. Sawant advocated for “city-wide rent control that would limit yearly rent increases to the cost of inflation.” In addition, she and other candidates support measures that would encourage property developers to pay fees into funds to build affordable housing for those making significantly less than the Area Median Income (AMI) — the city publishes income and rental figures for 30%–80% of AMI. I’m in favor of these latter fees, as they give incentive to keep building more housing, which is really what Seattle needs.

The oversimplified view of our housing crisis is that Seattle needs many more housing units in a small span of time. Mayor Ed Murray’s Housing Affordability and Livability Advisory (HALA) Committee report follows a mission of delivering “50,000 new homes, including 20,000 new homes for low- and moderate-income people, over the next decade.” The Seattle 2035 plan anticipates 100,000 new residents in the next 20 years. Figure 12 on page 8 of this report from Polaris Pacific, a property sales and marketing firm, shows an enormous increase in apartment construction since 2011. Any view near downtown will reveal a forest of cranes — 51 were sighted in January 2015.

Rents on some buildings are going up precipitously and there’s no stopping them. Even if rent control were to be in effect now, savvy developers would still be able to increase their revenue by acquiring properties to demolish them or to use personally then re-rent at a higher rate. If the market rate for my old $1000 apartment were really $1600, there will be a way to collect that $1600.

In addition, rent control has an effect of freezing residents in place: why move and pay the prevailing market rent at a new home when you can stay put and accept only a modest increase? Furthermore, if a landlord is forced to raise rents modestly on controlled apartments, that landlord will make up the difference by raising rents much more highly on vacant apartments. Those hated techies will still be able to afford these even-higher rents so the displacement and gentrification will only intensify.

So what can we do? The first answer is already in progress: build more — a lot more housing units are urgently needed. These brand-new units will rent for high dollar amounts, but new transplants might choose them over the existing, older and cheaper, housing, limiting price increases at older buildings. Even if we were to add fees to market-rate construction so as to subsidize low-income housing, builders will be willing to pay them.

We also need to build bigger. Capitol Hill is about to get a light-rail station next year, but just a couple of blocks from this new mass-transit hub are single-family structures that really should be replaced with multi-family structures to suit all socioeconomic strata. Several housing projects are planned at the light-rail station site itself and 38% of the apartments will rent below market rate. I favor bigger and taller developments even though I know that they’ll eventually block my fourth-floor apartment’s view of the Space Needle. Getting more people close to transit and walkable destinations will also reduce the need to own a car in an urban neighborhood. (Many objections to new development bemoan residents’ losing access to on-street parking that was ridiculously underpriced and oversubscribed to begin with.)

Lastly, and this is the toughest part, we need to be patient. Seattle, historically a boom-and-bust town, is clearly in a boom cycle. I moved here in 2006, at the tail end of the last boom cycle. I had been told that unlike cities whose housing had busted, we were special. As late as 2008, I had read that we would be protected by our strong companies like Boeing (now expanding elsewhere in the U.S.), Microsoft (which even then was doing rounds of layoffs and curtailing contractors), and Washington Mutual (which disappeared literally overnight). I’m not expecting Amazon to go under, but they’re currently a very fast-expanding company with razor-thin margins, vulnerable to even the smallest of shifts in the consumer market. The next time Amazon undergoes a hiring freeze, slimming its ranks through attrition (for which it is notorious), the rents on our by-then larger housing supply will be able to correct downwards. I saw that happen in 2008 when other companies struggled or collapsed and I know it will happen again. As an employee of another fast-growing technology company I sincerely hope I won’t be affected by the next economic correction, but I’m optimistic that my neighborhood will withstand it in its own quirky way.